If you plan to shop online this holiday season, shop smartly.
It's pretty easy when you follow this rule: do not click the "Bill Me Later" option. Pay with a credit card, or through PayPal. Many online retailers do offer this option, but by clicking on that box, you're not just delaying payment, you're opening a new credit account, and the retailer actually will do a quick credit check on you before they authorize a transaction. Financial experts say that too many credit checks and newly opened accounts can really hurt your credit score, which can make it harder for you to buy a car, a house, rent an apartment, or get a job in the near future.
Here's another problem: there's no real limit on how much you can spend with "Bill Me Later" transactions, and people without spending limits tend to spend much more than they meant to, which can easily bust your budget.
Last catch: you usually have only 90 days to pay the bill in full. If you don't, they pad your balance with a very high interest rate; 20% in most cases. And if you miss the payment deadline, the merchant will ding your credit report, hurting your credit score even more.
If you need a way to pay online, open a low rate credit card with a fixed limit. Use it for your online shopping needs- that way, you'll protect your budget and your credit.
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